Hernandez moved to the Bernabeu on a season-long loan last summer and found his first-team opportunities limited until last week, when Madrid coach Carlo Ancelotti was hit with several injuries to key players.
The 26-year-old has stepped up to the plate in magnificent fashion, scoring three decisive goals in two important games, and Madrid are now weighing up the possibility of signing him on a permanent basis.
According to Spanish newspaper Marca, Madrid’s purchase option, which is set at €20m, must be activated by Thursday.
However, Madrid are unwilling to meet that valuation and want to negotiate a new deadline and fee with Manchester United.
United are thought to be open to extending the deadline to allow more time for Madrid to make a decision.